Delays in progressing the Nama legislation through the various stages of debate have effectively scuppered Bank of Ireland's plans for a rights issue this year, according to senior sources at the bank.

The possibility of raising fresh capital had been alive as recently as two weeks ago when executives were preparing to move immediately if the Nama bill made it through the Dáil quickly with minimal changes. But as the committee stage is now expected to last until 3 November as deputies discuss the 250 proposed amendments to the legislation, the bank has given up hope of a fast resolution.

Bank of Ireland executives had been encouraged by the success of the bank's two unguaranteed bond issues in September, which raised €2.5bn in funding without government backing for the first time in a year.

The favourable market conditions had persuaded senior decision makers that a rights issue by year-end was possible. Industry analysts had speculated the bank could announce a cash call together with its interim results on 4 November, but now a consensus is forming that a recapitalisation will not happen until the first quarter of 2010 at the earliest.

The postponement could prove costly for B of I, as institutional investors had come out in support of a potential rights issue in the last few weeks, but warned that the window of opportunity would close within months if the Irish banks failed to get off the mark.

With several banks across Europe raising billions in the last few weeks, and with UK giant Lloyds reportedly considering a £15bn (€16.3bn) equity raising of its own next week, investor appetite could be sated before B of I is ready to go to the market.

Waiting until next year also means B of I will miss its chance to redeem the government's preference shares in the bank thereby reducing the government's stake from 25% to 15% and saving hundreds of millions in coupon payments. Moreover, any future government capital support will lead to a relatively higher level of state ownership in the bank - something chief executive Richie Boucher is keen to avoid post-Nama.

According to Davy, in­vestors had already begun to lose faith in an Irish fund raising before Christmas.

This explains the recent sell-off in both B of I and AIB shares. Not incidentally, a relatively lower share price makes a rights issue less attractive to the bank as well, as it diminishes the potential amount of money to be raised from each new share.